When faced with adverse financial circumstances, you should always consider a wide range of options. If all others turn out to be inapplicable to your affairs given your situation, you may find yourself faced with the prospect of declaring bankruptcy. Yet while the term is bandied about heavily it is often misunderstood since there are many forms of bankruptcy. It is essential to distinguish between these different classifications for your own good, regardless of whether or not you are seriously contemplating the prospect of declaring bankruptcy. In particular, an understanding of Chapter 7 bankruptcy can be highly useful since its declaration is a focal point of asset liquidation. Furthermore, many are uncertain as to what it constitutes. Comprehension of what Chapter 7 bankruptcy entails can not only help you determine whether it is the right choice for you but will also supplement your awareness of financial matters.
Chapter 7 bankruptcy (also known as liquidation) exists as a means of settling accounts with your creditors through sacrifice of your assets when you are completely unable to repay your debts. Under the terms of Chapter 7 bankruptcy, you list all your assets and liabilities. An appointed trustee who collects your property is responsible for determining what is exempt from sale and sells the non-exempt items in order to pay your debts. Profits from the sales are then given to your creditors in order to discharge your debts.
Dischargeable debts include medical bills, personal loans, business debts, credit card debts, repossession deficiencies and auto accident claims. Recent taxes, unscheduled debts, child and family support, and student loans, among others, cannot be discharged. If the trustee or the creditor finds faults with a discharge, it may be contested within 60 days via an adversary proceeding. If no such claim is placed by the end of this period, the court will issue a discharge, which you will receive 4 to 6 months after you enter into liquidation.
Chapter 7 bankruptcy eligibility is formally determined by the Means Test, which stipulates that in order to qualify your income must be below the median income level for a family in your state. Additionally, you must have attended a credit counseling session six months before pursuing liquidation and have not received either a Chapter 7 bankruptcy discharge within the last 8 years or a Chapter 13 discharge within the last 6 years. If your bankruptcy has been dismissed within the past six months due to contempt of court of failure to show up you will not qualify.
According to bankruptcy laws in different states, there are different indications of what property is exempt from Chapter 7 bankruptcy sale. However, you must have equity in your house or car and must maintain payments in order to qualify for these exemptions. You should consult your Bankruptcy Lawyer for more information about whether any exemptions apply to your situation.
While Chapter 7 bankruptcy involves the loss of your property and is no doubt highly painful, it may be an option worth considering. However, no form of bankruptcy should be pursued without careful consideration. Always consult your Bankruptcy Attorney and take advantage of their professional expertise.
Since the summer of 2010, he has volunteered as a Savings Officer for the Community Empowerment Fund (CEF) in Chapel Hill, which seeks to promote financial literacy and help fiscally strained individuals achieve self-sufficiency. Apart from writing, Siddarth enjoys reading, travel, and watching British television programs. Upon graduation, he plans to earn a graduate degree and seek employment in the field of international development.
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